Mighty-O Donuts, a longtime Seattle favorite known for its organic and vegan-friendly treats, has filed for Chapter 11 bankruptcy protection amid mounting financial struggles. The company, which operates four cafes and a production facility, is burdened with over $1 million in liabilities.
Federal court documents reveal that the filing took place in July, with Mighty-O citing the impacts of the pandemic, inflation, and high fixed costs as major contributors to its financial woes. Founder Ryan Kellner reported a sharp decline in profits this summer, leading to the company’s decision to seek bankruptcy protection.
According to the bankruptcy filing, the COVID-19 pandemic took a significant toll on Mighty-O’s operations, causing a drop in customer traffic, employee shortages, and supply chain disruptions. “The pandemic severely impacted Mighty-O’s ability to operate a financially sound business,” one document states. “The company faced rising costs due to inflation and struggled with vendor services, leading to financial instability.”
In its Chapter 11 filing, the company outlined liabilities of over $1 million, with assets that nearly match. The filing includes a strategy to keep the business operating under bankruptcy protection rather than liquidating assets, which could provide better returns for creditors.
As part of its recovery plan, Mighty-O is negotiating a new lease for its 2nd Ave location and making cuts to other expenses. The company aims to use the savings to pay off creditors, including significant loans from Umpqua Bank and the U.S. Small Business Administration. In a move to protect its customers, the company is also working to honor gift card obligations as part of the bankruptcy proceedings.
Mighty-O still has 17 months remaining on its lease for its Capitol Hill café, located in the Trace Lofts building at 12th and Madison. This location, which took over the space previously occupied by High 5 Pie, has been part of the Capitol Hill community for nearly a decade.
As the company works to stabilize, it faces growing competition in the neighborhood. Voodoo Doughnuts, a popular doughnut chain from Portland, is preparing to open a 24-hour location on Capitol Hill, adding a major new player to the local doughnut scene.
Related Topics: